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© Analysys Mason Limited 2015
U B S T M T Conference September 2015
analysysmason.com
The global M2M and IoT market: forecasts and key trends
Michele Mackenzie
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Consulting from Analysys Mason
For 30 years, our consultants have been bringing the benefits of applied intelligence to enable clients around the world to make the most of their opportunities.
To find out more, please visit www.analysysmason.com/consulting
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Consultingportfolio
Strategy and planning
Transactionsupport
EXPERTISECommercial due diligenceRegulatory due diligenceTechnical due diligence
Regulation
EXPERTISEPolicy development and response
Margin squeeze testsAnalysing regulatory accounts
Expert legal supportMedia regulation
Postal sector costing, pricing and regulationRegulatory economic costingNet cost of universal service
Performance improvement
EXPERTISEMarket researchMarket analysisBusiness strategy and planningMarket sizing and forecastingBenchmarking and best practiceNational and regional broadband strategy and implementation
EXPERTISEPerformance analysis
Technology optimisationCommercial excellence
Transformation services
EXPERTISERadio spectrumauction supportRadio spectrum
management
Spectrum policy and auction support
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Research from Analysys Mason
We provide dedicated coverage of developments in the telecoms, media and technology (TMT) sectors, through a range of research programmes that focus on different services and regions of the world.
To find out more, please visit www.analysysmason.com/research
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PROGRAMMES
Service AssuranceCustomer Experience Management
Customer CareRevenue Management
AnalyticsNetwork Orchestration
Software-Controlled NetworkingService Delivery Platforms
Service FulfilmentTelecoms Software Market Shares
Telecoms Software Forecasts
PROGRAMMES
Digital Economy StrategiesDigital Economy PlatformsFuture Comms and MediaIoT and M2M Solutions
PROGRAMMES
Mobile ServicesMobile DevicesFixed Broadband and Multi-PlaySME Strategies
PROGRAMMES
Fixed NetworksWireless Networks
Spectrum
Consumer and SME services
Digital economy
Regional marketsTelecoms
software
Network technologies
PROGRAMMES
Global Telecoms ForecastsAsia–PacificThe Middle East and AfricaEuropean Country ReportsEuropean Core ForecastsEuropean Telecoms Market Matrix
Researchportfolio
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IoT and M2M Solutions Programme: In 2014, our IoT and M2M research was largely vertically focused
Examples of vertical focused research reports
Connected Car Security Fleet Management Industrial Internet
Digital Signage Smart Cities Smart Metering
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IoT and M2M Solutions programme: In 2015, our IoT and M2M research focuses on examining horizontal issues, while further developing our vertical insights
Examples of planned horizontally focused research reports, 2015
Opportunities in APAC
Application Enablement Platforms
Enterprise wearables
Emerging Wireless Access Technologies
Healthcare Usage Based Insurance
Building Energy Management
Examples of vertically focused research reports
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CONTENTSCONTENTS
INTRODUCTION TO ANALYSYS MASON
DEMAND AND SUPPLY SIDE DRIVERS
OUTLOOK FOR M2M/IoT
KEY TRENDS
ABOUT THE AUTHOR
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Definition: M2M versus IoT
• M2M and IoT continue to be used interchangeably on both the demand and supply side of the industry.
• M2M typically refers to the connectivity that enables two or more• machines or things to communicate with each other.• The IoT industry is nascent and its boundaries and structures are still
evolving – and, as a result, so is its definition. • IoT is often closely associated with the consumer market and• consumer devices, and IoT certainly takes into account the human
interaction with the data generated by devices in a connected environment.
• However, IoT is just as relevant, if not more so, in the enterprise domain as it is in the consumer environment.
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Barriers: Fragmentation of standards, and fears over privacy and security will make some firms reluctant to invest
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Key inhibitors for growth in internet of things
New providersThe lowering cost of service provision has led to hundreds of new start ups
PrivacyNew providers
The lowering cost of service provision has led to hundreds of new start ups
Fragmentation of standards New providers
The lowering cost of service provision has led to hundreds of new start ups
Security
Internet of things
Billions of new devices will be connected
New providersThe lowering cost of service provision has led to hundreds of new start ups
Vertical-specificbarriers New providers
The lowering cost of service provision has led to hundreds of new start ups
Funding
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Drivers: Developments in devices and networks as well as new business models are enabling new internet of things services
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Key reasons for enterprise adoption of internet of things
Internet of things
Billions of new devices will be connected
New providersThe lowering cost of service provision has led to hundreds of new start ups
Opportunities to grow revenuesNew providers
The lowering cost of service provision has led to hundreds of new start ups
Opportunities to reduce costsNew providers
The lowering cost of service provision has led to hundreds of new start ups
Regulation on connected cars & smart meters
New providersThe lowering cost of service provision has led to hundreds of new start ups
New low cost devices, networks &
solutions
$$
New providersThe lowering cost of service provision has led to hundreds of new start ups
Stimulus plans and government funding
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And forecasts from industry stakeholders for ‘connected things’ have been bullish….
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Ericsson’s forecast for connected devices
Cisco’s forecast for connected devices
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…although some forecasts have since been slashed
Ericsson’s forecast for connected devices
26 BILLION CONNECTED DEVICES
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Headlines like these indicate increased media focus on the broader IoT sector and it’s not always positive…
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6 reasons why we’re under-hyping the Internet of Things
The Internet of Things businesses taking the sector by storm
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But the macro-economic situation is driving enterprises to try to achieve operational excellence and the IoT presents an opportunity…
Figure: Growth in world output, developed and emerging economies, 2011-2014 [Source: World Economic Outlook Update, IMF, July, 2013]
–1%0%1%2%3%4%5%6%7%
European Union Emergingmarkets
2011 2012 2013 2014
Operational efficiency
Risk management
Modernisation
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The evolution of equipment with respect to time and intelligence
And smart connected devices will redefine many industry sectors and transform companies and user experiences
‘Dumb’ physical equipment
Smart equipment with embedded
system
Smart connected equipment with
networking capabilities
Past, present & future
Present & future
Recent past, present & future
Prod
uct I
ntel
ligen
ce
Time
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CONTENTSCONTENTS
INTRODUCTION TO ANALYSYS MASON
DEMAND AND SUPPLY SIDE DRIVERS
OUTLOOK FOR M2M/IoT
KEY TRENDS
ABOUT THE AUTHOR
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M2M device connections by sector, worldwide, 2013–2024
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.52013
2014
2015
2016
2017
2018
2019
2020
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Connections (billion)
Automotive and transport Financial services HealthcareIndustrial Public sector RetailSecurity Utilities Other
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Supply side and demand side factors feed into our projection that M2M connections will grow to 3.4 billion by 2024
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Three sectors will account for more than 90% of connections from 2014 onwards
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M2M device connections by key sectors, worldwide, 2013–2024
0%
10%
20%
30%
40%
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70%
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90%
100%
2013
2014
2015
2016
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Percentage of connections
Automotive and transport Security Utilities Other
Automotive & Transportvertical
Security vertical
Utilities vertical
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M2M device connections by sector, Western Europe, 2013–2024
M2M device connections by sector, North America, 2013–2024
North America and Western Europe have pioneered developments in M2M and IoT
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600
2013
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2018
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Connections (million)
CAGR 16%
050100150200250300350400450
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Connections (million)
CAGR 15%
7 million connections
EUR 35bn revenue
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Emerging Asia Pacific (China!) is now leading in terms of overall volumes of connections and Developed Asia Pacific focuses on different segments
M2M device connections by sector, EMAP, 2013–2024
M2M device connections by sector, DVAP, 2013–2024
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02004006008001000120014001600
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Connections (million)
CAGR 22%
300m + smart meters
0
50
100
150
200
250
2013
2014
2015
2016
2017
2018
2019
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2024
Connections (million)
CAGR 22%
3000 digital signage units
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M2M device connections by sector, Middle East & Africa, 2013–2024
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Middle East and Africa is growing fast from a small base
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2013
2014
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2017
2018
2019
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2024
CAGR 22%
“ROI depends on the major fleet issues in each market. It could be oil theft, driver behaviour, route optimisation, vehicle recovery and cold storage monitoring. However, on average, an ROI in the 15–20% range can be expected.”
Head of M2M, Middle East telco
R66,000 fuel savings month
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Passenger cars in use with embedded or tethered connectivity
Core segments: Several factors are now aligning to make in-car connectivity a reality
1 Technological advancement
5 New data and connectivity opportunities for VMs
Consumer demand seamless services4Vehicle manufacturers extend their appeal3
2 Regulation drives adoption
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Connections (million)
Embedded Tethered
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Fleet management M2M device connections by vehicle type, worldwide, 2013–2024 [Source: Analysys Mason, 2014]
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Core segments: fleet management is a more mature M2M segment but still has room for growth
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80
100
2013
2014
2015
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Connections (million)
HGV LCV
§ The penetration rate for fleet management solutions stood at 15% of total fleet vehicles in 2013, when there were 34 million fleet management connections worldwide.
§ In developing markets, reducing vehicle and fuel theft and misuse of the vehicle are stimulating demand for solutions
§ But hardware and installation costs can be prohibitive
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M2M device connections in the security sector by application, worldwide, 2013–2024 [Source: Analysys Mason, 2014]
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Core segments: alarms constitute the largest application for connectivity in the security sector
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350
2013
2014
2015
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2024
Connections (million)
Alarms CCTV
• The migration from ‘dumb’ security systems to smart connected systems that enable users to access and monitor alarms and CCTV remotely isrevitalising the security sector and providing new opportunities for connectivity.
• The number of connected security devices worldwide will grow from 83 million in 2013 to 307 million in 2024, at a CAGR of 13%.
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CONTENTSCONTENTS
INTRODUCTION TO ANALYSYS MASON
DEMAND AND SUPPLY SIDE DRIVERS
OUTLOOK FOR M2M/IoT
KEY TRENDS
ABOUT THE AUTHOR
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Key trends in the M2M/IoT market
LPWA: optimised networks will drive future growth
M2M and IoT merger and acquisition activity
continues to shape the industry
Players are positioning to take advantage of the M2M/IoT market
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LPWA network standards are emerging and are opening new market opportunities
Total addressable market and forecast of LPWA opportunity and connections
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Con
nec
tion
s (b
illio
ns)
Total addressable market Forecast of LPWA connections
Low CostLess than USD5 per module
Long, independent power source Up to and exceeding 10 years
Strong propagationThe ability to penetrate walls and obstacles
Proposed characteristics of LPWA
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LPWA networks launches are mainly concentrated in Europe for now: A number of operators are deploying LoRa LPWAN
KPNNetherlands
ProximusBelgium
BouyguesFrance
SwisscomSwitzerland
USA
South Africa
CiscoUSA
FastnetSouth Africa
LoRa network launched
LoRa network planned
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Vibrant M&A activity has shaped the composition of the M2M value chain in 2013 and 2014, and will continue to do so through 2015
Established M2M players aim to expand their position in the M2M value chain
Established M2M players strengthen their position in the M2M value chain
Players entering the M2M space to complement their core line of business and capitalise on the M2M opportunity
Financial investments to capitalise on the M2M opportunity$
$7.7 B Total disclosed transaction value (Nov. 2014)
Source: Hampleton Partners
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Financial investors
Technology companies
M&A activity in M2M is driven by diverse players and diverse motivations
▪ Source: Analysys Mason, Public sources
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In market consolidation Telecoms operators Non-TMT strategic
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331
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Key takeaways
1Demand and supply side drivers are aligning to drive growth in the M2M/IoT market • But the market is immature and dynamic and forecasts have already been adjusted
• The IoT is however expected to deliver a new wave of economic growth
2Regional and vertical variations will persist§ Developing markets are beginning to deploy M2M/IoT more rapidly§ Fleet management, connected car, security and utilities have grown quickly but
other verticals are attracting interest.
3IoT optimised networks are emerging and M&A activity is increasing§ LPWA affords a significant opportunity to connect new application groups § M&A activity is significant as players position to capture the value of the IoT